If I short sell my house for $ 200K and 425K on my mortgage should i $ I still need to pay the difference?

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My mortgage is $ 325k first loan and HELOC $ 107k. I need to pay the difference to my lender? Can you follow me, even if I get a debt relief?


  1. Reply
    May 18, 2011 at 12:26 pm

    You don’t qualify for forgiveness with 2 loans.

    I seriously doubt they will approve this short sale, but you can ask them what they are going to do while you are asking permission to short sale it in the first place.

  2. Reply
    May 18, 2011 at 12:43 pm

    A short sale requires permission of the lender, otherwise you have defaulted on your loan, so without their permission you would have to pay the difference.

    The good news is the IRS just ruled that you are not liable for taxes on the amount of the loan forgiven by your lender.

  3. Reply
    May 18, 2011 at 12:50 pm

    Agree with #1. If you are 225k in the hole, is bankruptcy an option? Or abandoning the home to the lender?

  4. Reply
    May 18, 2011 at 1:01 pm

    You are still required to pay off your loans.

  5. Reply
    May 18, 2011 at 1:13 pm

    If it were to be approved, they can either 1) forgive the debt (which would be doubtful) 2) issue you a 1099 for the difference and you would then claim it as income on your taxes or 3) they would set up something where you would owe them the difference. # 2 is the most likely. There has been a lot of talk about tax breaks to people who have this (the 1099 due to a short sale) or a 1099 due to a foreclosure.

  6. Reply
    Tony D
    May 18, 2011 at 1:50 pm

    You’ve got a temporary reprieve in the tax code going for you. If you short sell, you won’t have to pay taxes on the forgiven debt, courtesy of our government. Your credit will take a hit, but it could be a lot worse. Short sale is still better than foreclosure. Get a good realtor, verify the tax advice and good luck with it.

  7. Reply
    John O
    May 18, 2011 at 2:04 pm

    You will have to pay income tax on the difference. In this case 225k. That will be added to your income otherwise known as 1099. The odds of the bank taking a 225k hit are slim and none. If you owe that much more than it is worth I recommend letting it go to foreclosure and living there rent free for 8-9 months. That’s assuming your credit is already shot.

  8. Reply
    May 18, 2011 at 2:54 pm

    Yes. Unless your lender deems it totally uncollectable and agrees to write the loan off the books. If the lender writes off the loan make sure you get the original promissory note back.

  9. Reply
    Laurie the Realtor
    May 18, 2011 at 3:07 pm

    I also highly doubt they will accept this short sale… There are 2 ways this could result…1. Either the lender will approve the short sale and you will be given a “gift” of the difference and will have to apply this towards your income next tax time, or 2. They will make you pay them the difference over time. When you call initially to have a short sale approved, as them how they handle things- most of the time it is the #1 situation, but you ofcourse want to make sure of this prior to putting yourself in any kinid of a situation.

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